How do Hospitals Respond to Price Changes? Evidence from Norway

Impact of health benefit package policy interventions on service utilisation under government-funded health insurance in Punjab, India: analysis of Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY)

Background

The design of health benefits package (HBP), and its associated payment and pricing system, is central to the performance of government-funded health insurance programmes. We evaluated the impact of revision in HBP within India's Pradhan Mantri Jan Arogya Yojana (PM-JAY) on provider behaviour, manifesting in terms of utilisation of services.

Methods

We analysed the data on 1.35 million hospitalisation claims submitted by all the 886 (222 government and 664 private) empanelled hospitals in state of Punjab, from August 2019 to December 2022, to assess the change in utilisation from HBP 1.0 to HBP 2.0. The packages were stratified based on the nature of revision introduced in HBP 2.0, i.e., change in nomenclature, construct, price, or a combination of these. Data from National Health System Cost Database on cost of each of the packages was used to determine the cost-price differential for each package during HBP 1.0 and 2.0 respectively. A dose-response relationship was also evaluated, based on the multiplicity of revision type undertaken, or based on extent of price correction done. Change in the number of monthly claims, and the number of monthly claims per package was computed for each package category using an appropriate seasonal autoregressive integrated moving average (SARIMA) time series model.

Findings

Overall, we found that the HBP revision led to a positive impact on utilisation of services. While changes in HBP nomenclature and construct had a positive effect, incorporating price corrections further accentuated the impact. The pricing reforms highly impacted those packages which were originally significantly under-priced. However, we did not find statistically significant dose-response relationship based on extent of price correction. Thirdly, the overall impact of HBP revision was similar in public and private hospitals.

Interpretation

Our paper demonstrates the significant positive impact of PM-JAY HBP revisions on utilisation. HBP revisions need to be undertaken with the anticipation of its long-term intended effects.

Funding

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).

The end of an era? Activity-based funding based on diagnosis-related groups: A review of payment reforms in the inpatient sector in 10 high-income countries

CONTEXT

Across the member countries of the Organisation for Economic Co-Operation and Development, policy makers are searching for new ways to pay hospitals for inpatient care to move from volume to value. This paper offers an overview of the latest reforms and their evidence to date.

METHODS

We reviewed reforms to DRG payment systems in 10 high-income countries: Australia, Austria, Canada (Ontario), Denmark, France, Germany, Norway, Poland, the United Kingdom (England), and the United States.

FINDINGS

We identified four reform trends among the observed countries, them being (1) reductions in the overall share of inpatient payments based on DRGs, (2) add-on payments for rural hospitals or their exclusion from the DRG system, (3) episode-based payments, which use one joint price to pay providers for all services delivered along a patient pathway, and (4) financial incentives to shift the delivery of care to less costly settings. Some countries have combined some or all of these measures with financial adjustments for quality of care. These reforms demonstrate a shift away from activity and efficiency towards a diversified set of targets, and mirror efforts to slow the rise in health expenditures while improving quality of care. Where evaluations are available, the evidence indicates mixed success in improving quality of care and reducing costs and expenditures.

Hospital response to Activity-Based Funding and price incentives: Evidence from Ireland

Activity-Based Funding (ABF) is a funding policy incentivising hospitals to deliver more efficient care. ABF can be complemented by additional price incentives to further drive hospital efficiency. In 2016, ABF was introduced for public patients admitted to Irish public hospitals. Additionally, a price incentive to perform laparoscopic cholecystectomy as day-case surgery was introduced in 2018. Private patient activity in public hospitals was subject to neither ABF nor price incentive. Using national Hospital In-Patient-Enquiry activity data 2013-2019, we evaluated the impact of ABF and the price incentive for laparoscopic cholecystectomy surgery in Ireland. We exploit variation in hospital payment for public and private patients treated in public acute Irish hospitals and employ a Propensity Score Matching Difference-in-Differences approach. We estimate the funding change impacts across outcomes measuring the proportion of day-case admissions and length of stay. We found no significant impact for either outcomes linked to ABF introduction. Similarly, no impacts linked to the price incentive were observed. It appears providers of laparoscopic cholecystectomy in Irish public hospitals did not react to the new funding mechanisms. The implementation of the funding policies did not improve hospital efficiency. Further strengthening of these new funding mechanisms are required to deliver more efficient care.

Older high-cost patients in Norwegian somatic hospitals: a register-based study of patient characteristics

OBJECTIVE

Two-thirds of the economic resources in Norwegian hospitals are used on 10% of the patients. Most of these high-cost patients are older adults, which experience more unplanned hospital admissions, longer hospital stays and higher readmission rates than other patients. This study aims to examine the individual and clinical characteristics of older patients with unplanned admissions to Norwegian somatic hospitals and how these characteristics differ between high-cost and low-cost older patients.

DESIGN

Observational cross-sectional study.

SETTING

Norwegian somatic hospitals.

PARTICIPANTS

National registry data of older Norwegian patients (≥65 years) with ≥1 unplanned contact with somatic hospitals in 2019 (n=2 11 738).

PRIMARY OUTCOME MEASURE

High-cost older patients were defined as those within the 10% of the highest diagnosis-related group weights in 2019 (n=21 179). We compared high-cost to low-cost older patients using bivariate analyses and logistic regression analysis.

RESULTS

Men were more likely to be high-cost older patients than women (OR=1.25, 95% CI 1.21 to 1.29) and the oldest (90+ years) compared with the youngest older adults (65-69 years) were less likely to cause high costs (OR=0.47, 95% CI 0.43 to 0.51). Those with the highest level of education were less likely to cause high costs than those with primary school degrees (OR=0.74, 95% CI 0.69 to 0.80). Main diagnosis group (OR=3.50, 95% CI 3.37 to 3.63) and dying (OR=4.13, 95% CI 3.96 to 4.30) were the clinical characteristics most strongly associated with the likelihood of being a high-cost older patient.

CONCLUSION

Several of the observed patient characteristics in this study may warrant further investigation as they might contribute to high healthcare costs. For example, MDGs, reflecting comprehensive healthcare needs and lower education, which is associated with poorer health status, increase the likelihood of being high-cost older patients. Our results indicate that Norwegian hospitals function according to the intentions of those having the highest needs receiving most services.

Impact of tariff refinement on the choice between scheduled C-section and normal delivery: Evidence from France

Studying quasi-experimental data from French hospitals from 2010 to 2013, we test the effects of a substantial diagnosis-related group (DRG) tariff refinement that occurred in 2012, designed to reduce financial risks of French maternity wards. To estimate the resulting DRG incentives with regard to the choice between scheduled C-sections and other modes of child delivery, we predict, based on pre-admission patient characteristics, the probability of each possible child delivery outcome and calculate expected differences in associated tariffs. Using patient-level administrative data, we find that introducing additional severity levels and clinical factors into the reimbursement algorithm had no significant effect on the probability of a scheduled C-section being performed. The results are robust to multiple formulations of DRG financial incentives. Our paper is the first study that focuses on the consequences of a DRG refinement in obstetrics and develops a probabilistic approach suitable for measuring the expected effects of DRG fee incentives in the presence of multiple tariff groups.

Related variations: A novel approach for detecting patterns of regional variations in healthcare utilisation rates

Regional variations in healthcare utilisation rates are ubiquitous and persistent. In settings where an aggregate national health service budget is allocated primarily on a per capita basis, little regional variation in total healthcare utilisation rates will be observed. However, for specific treatments, large variations in utilisation rates are observed, iymplying a substitution effect at some point in service delivery. The current paper investigates the extent to which this substitution effect occurs within or between specialties, particularly distinguishing between emergency versus elective care. We used data from Statistics Norway and the Norwegian Patient Registry on eight somatic surgeries for all patients treated from 2010 to 2015. We calculated Diagnosis-Related Group (DRG) -weight per capita in 19 hospital regions. We applied principal component analysis (PCA) to demonstrate patterns in DRG-weight, annual relative changes in DRG-weight, and DRG-weight production for elective care. We show that treatments with similar characteristics cluster within regions. Treatment frequency explains 29% of the total variation in treatment rates. In a dynamic model, treatments with a high degree of emergency care are negatively correlated with treatments with a high degree of elective care. Furthermore, when considering only elective care treatments, the substitution effect occurs between specialties and explains 49% of the variation. When designing policies aimed at reducing regional variations in healthcare utilisation, a distinction between elective and emergency care as well as substitution effects need to be considered.

Do budget constraints limit access to health care? Evidence from PCI treatments in Hungary

Under Hungary's single payer health care system, hospitals face an annual budget cap on most of their diagnoses-related group based reimbursements. In July 2012, percutaneous coronary intervention (PCI) treatments of acute myocardial infarction were exempted from that hospital level budget cap. We use countrywide individual-level patient data from 2009 to 2015 to map the effect of such a quasi-experimental change in monetary incentives on health provider decisions and health outcomes. We find that direct admissions into PCI-capable hospitals increase, especially in central Hungary, where there are several hospitals which can compete for patients. The proportion of PCI treatments at PCI-capable hospitals, however, does not increase, and neither does the number of patient transfers from non-PCI hospitals to PCI-capable ones. We conclude that only patient pathways, plausibly influenced by hospital management, were affected by the shift in incentives, while physicians' treatment decisions were not. While average length of stay decreased, we do not find any effect on 30-day readmissions or in-hospital mortality.

A comparison of four quasi-experimental methods: an analysis of the introduction of activity-based funding in Ireland

Background

Health services research often relies on quasi-experimental study designs in the estimation of treatment effects of a policy change or an intervention. The aim of this study is to compare some of the commonly used non-experimental methods in estimating intervention effects, and to highlight their relative strengths and weaknesses. We estimate the effects of Activity-Based Funding, a hospital financing reform of Irish public hospitals, introduced in 2016.

Methods

We estimate and compare four analytical methods: Interrupted time series analysis, Difference-in-Differences, Propensity Score Matching Difference-in-Differences and the Synthetic Control method. Specifically, we focus on the comparison between the control-treatment methods and the non-control-treatment approach, interrupted time series analysis. Our empirical example evaluated the length of stay impact post hip replacement surgery, following the introduction of Activity-Based Funding in Ireland. We also contribute to the very limited research reporting the impacts of Activity-Based-Funding within the Irish context.

Results

Interrupted time-series analysis produced statistically significant results different in interpretation, while the Difference-in-Differences, Propensity Score Matching Difference-in-Differences and Synthetic Control methods incorporating control groups, suggested no statistically significant intervention effect, on patient length of stay.

Conclusion

Our analysis confirms that different analytical methods for estimating intervention effects provide different assessments of the intervention effects. It is crucial that researchers employ appropriate designs which incorporate a counterfactual framework. Such methods tend to be more robust and provide a stronger basis for evidence-based policy-making.

Supplementary Information

The online version contains supplementary material available at 10.1186/s12913-022-08657-0.

Can case-based payment contain healthcare costs? - A curious case from China

We adopted a difference-in-difference (DID) design to evaluate the impact of a case-based payment pilot in Tianjin, China on hospital admission, utilization of varied therapeutic regimes, and the associated costs. We used claim data of all admissions of angina and acute myocardial infarction during July 2015 to June 2018, 18 months before and after the program. Our analyses were supported by convincing common trends tests and a couple of sensitivity analyses. As intended, for patients who received percutaneous coronary stenting (PCS) and were counted in the case-based payment system, we showed that the program decreased length-of-stay, per-admission spending, and out-of-pocket spending by 20.8%, 14.2%, and 95.5%, respectively, but did not increase readmissions. However, when considering all patients who suffered from the two types of coronary heart diseases, we found that the program otherwise increased per-admission spending by nearly 11%. As a result, the program took a perverse effect in increasing monthly spending for the health insurance scheme and the society by 1005.6 thousand USD (47·5%) and 1095·7 thousand USD (34·7%), respectively. Increases in hospital admissions, and proportion of performing PCS accounted for 66·7% and 39·2% of the rise, respectively. In addition, our analysis provided evidence of health providers' cream-skimming behaviors, including selecting younger patients with lower CCI in the case-based system, up-coding complications, and keeping higher cost patients in the fee-for-service payment system. We draw lessons that case-based payment may make an unintended impact that increases healthcare costs when incentives are not properly designed.

Predicting diagnostic coding in hospitals: individual level effects of price incentives

The purpose of this paper is to test if implicit price incentives influence the diagnostic coding of hospital discharges. We estimate if the probability of being coded as a complicated patient was related to a specific price incentive. This paper tests empirically if upcoding can be linked to shifts in patient composition through proxy measures such as age composition, length of stay, readmission rates, mortality- and morbidity of patients. Data about inpatient episodes in Norway in all specialized hospitals in the years 1999-2012 were collected, N = 11 065 330. We examined incentives present in part of the hospital funding system. First, we analyse trends in the proxy measures of diagnostic upcoding: can hospital behavioural changes be seen over time with regards to age composition, readmission rates, length of stay, comorbidity and mortality? Secondly, we examine specific patient groups to see if variations in the price incentive are related to probability of being coded as complicated. In the first years (1999-2003) there was an observed increase in the share of episodes coded as complicated, while the level has become more stable in the years 2004-2012. The analysis showed some indications of upcoding. However, we found no evidence of widespread upcoding fuelled by implicit price incentive, as other issues such as patient characteristics seem to be more important than the price differences. This study adds to previous research by testing individual level predictions. The added value of such analysis is to have better case mix control. We observe the presence of price effects even at individual level.

It probably worked: a Bayesian approach to evaluating the introduction of activity-based hospital payment in Israel

Background

In 2013–2014, Israel accelerated adoption of activity-based payments to hospitals. While the effects of such payments on patient length of stay (LoS) have been examined in several countries, there have been few analyses of incentive effects in the Israeli context of capped reimbursements and stretched resources.

Methods

We examined administrative data from the Israel Ministry of Health for 14 procedures from 2005 to 2016 in all not-for-profit hospitals (97% of the acute care beds). Survival analyses using a Weibull distribution allowed us to examine the non-negative and right-skewed data. We opted for a Bayesian approach to estimate relative change in LoS.

Results

LoS declined in 7 of 14 procedures analyzed, notably, in 6 out of 7 urological procedures. In these procedures, reduction in LoS ranged between 11% and 20%. The estimation results for the control variables are mixed and do not indicate a clear pattern of association with LoS.

Conclusions

The decrease in LoS freed resources to treat other patients, which may have resulted in reduced waiting times. It may have been more feasible to reduce LoS for urological procedures since these had relatively long LoS. Policymakers should pay attention to the effects of decreases in LoS on quality of care. Stretched hospital resources, capped reimbursements, retrospective subsidies and underpriced procedures may have limited hospitals' ability to reduce LoS for other procedures where no decrease occurred (e.g., general surgery).

Supplementary Information

The online version contains supplementary material available at 10.1186/s13584-022-00515-y.

The effects of audits and fines on upcoding in neonatology

Upcoding is a common type of fraud in healthcare. However, how audit policies need to be designed to cope with upcoding is not well understood. We provide causal evidence on the effect of random audits with different probabilities and financial consequences. Using a controlled laboratory experiment, we mimic the decision situation of obstetrics staff members to report birth weights of neonatal infants. Subjects' payments in the experiment depend on their reported birth weights and follow the German non-linear diagnosis-related group remuneration for neonatal care. Our results show that audits with low detection probabilities only reduce fraudulent birth-weight reporting, when they are coupled with fines for fraudulent reporting. For audit policies with fines, increasing the probability of an audit only effectively enhances honest reporting, when switching from detectable to less gainful undetectable upcoding is not feasible. Implications for audit policies are discussed.

Financial and social impacts of drug price changes: Evidence from 2017 healthcare reform in Liaoning Province, China

Healthcare reform was launched in China in 2017 to reduce the financial burden on both patients and the government by terminating the 15% markup on drug prices at public hospitals. To evaluate this reform's impacts, we conduct a quantitative study based on the operational data from one of the top 10 hospitals in Liaoning, China. Specifically, we utilize log-linear and logistic regression models to examine the policy's impacts on patients' total healthcare expenditures and the hospital's adjustments of its offering list that consists of western medicine (WM), traditional Chinese medicine (TCM) and non-medicine (NM). We find that the reform effectively alters the patients' spending structure and the hospital's profit model: (1) it decreases patients' average per-visit expenditure on WM and TCM while increases their average NM expenditure; (2) it differently affects patients from various socioeconomic groups and leaves space to target on groups that may demand extra financial and healthcare assistance; (3) it slows down the hospital's revenue increase and incentivizes the hospital to shift the WM revenue from margin-driven to volume-driven and to weigh more on NM revenue and (4) it encourages the hospital to keep WMs with steady price and drop WMs whose price keeps rising.

Performance Comparison of Public Hospitals Between 2014 and 2018 in Different Regions of Guangdong Province, China, Following 2017 Medical Service Price Reforms

This study analyzed performance of public hospitals and regional differences in performance following reform of medical service prices in Guangdong province, China. From three cities in four regions, we randomly selected a total of 12 traditional Chinese medicine hospitals and 12 general tertiary hospitals. Six questionnaires were completed by the hospitals, using 2014-2018 internal data. Principal components analysis was used to compare performances of the hospitals and regions following price reform. The extent to which medical service prices were adjusted varied considerable for different procedures in the same region and for the same category of procedures among regions. After reform, compensation for medical services in public hospitals reached the target of 80%, except in the Western region. However, annual growth of costs to patients was generally above 4%; the burden on patients was not alleviated by fee control. Reforms were more effective for comprehensive than Chinese traditional medicine hospitals. Performance scores of general hospitals in the Pearl River Delta, Eastern, Western, and Northern regions were 1.24, 1.16, -0.22, and -1.01, respectively. This is consistent with ranking by level of economic development of each region. The government should implement a regional medical service pricing mechanism. Additionally, comprehensive and traditional Chinese medicine hospitals should each have appropriate pricing policies. Future policies should focus on controlling costs incurred by patients.

Analytical methods to assess the impacts of activity-based funding (ABF): a scoping review

BACKGROUND

Activity-Based Funding (ABF) has been implemented across many countries as a means to incentivise efficient hospital care delivery and resource use. Previous reviews have assessed the impact of ABF implementation on a range of outcomes across health systems. However, no comprehensive review of the methods used to generate this evidence has been undertaken. The aim of this review is to identify and assess the analytical methods employed in research on ABF hospital performance outcomes.

METHODS

We conducted a scoping review in line with the Preferred Reporting Items for Systematic Reviews and Meta-Analyses extension for scoping reviews. Five academic databases and reference lists of included studies were used to identify studies assessing the impact of ABF on hospital performance outcomes. Peer-reviewed quantitative studies published between 2000 and 2019 considering ABF implementation outside the U.S. were included. Qualitative studies, policy discussions and commentaries were excluded. Abstracts and full text studies were double screened to ensure consistency. All analytical approaches and their relative strengths and weaknesses were charted and summarised.

RESULTS

We identified 19 studies that assessed hospital performance outcomes from introduction of ABF in England, Korea, Norway, Portugal, Israel, the Netherlands, Canada, Italy, Japan, Belgium, China, and Austria. Quasi-experimental methods were used across most reviewed studies. The most commonly used assessment methods were different forms of interrupted time series analyses. Few studies used difference-in-differences or similar methods to compare outcome changes over time relative to comparator groups. The main hospital performance outcome measures examined were case numbers, length of stay, mortality and readmission.

CONCLUSIONS

Non-experimental study designs continue to be the most widely used method in the assessment of ABF impacts. Quasi-experimental approaches examining the impact of ABF implementation on outcomes relative to comparator groups not subject to the reform should be applied where possible to facilitate identification of effects. These approaches provide a more robust evidence-base for informing future financing reform and policy.

Fee equalization and appropriate health care

Fee equalization in health care brings under a unique tariff several medical treatments, coded under different Diagnosis Related Groups (DRGs). The aim is to improve healthcare quality and efficiency by discouraging unnecessary, but better-paid, treatments. We evaluate its effectiveness on childbirth procedures to reduce overuse of c-sections by equalizing the DRGs for vaginal and cesarean deliveries. Using data from Italy and a difference-in-differences approach, we show that setting an equal fee decreased c-sections by 2.6%. This improved the appropriateness of medical decisions, with more low-risk mothers delivering naturally and no significant changes in the incidence of complications for vaginal deliveries. Our analysis supports the effectiveness of fee equalization in avoiding c-sections, but highlights the marginal role of financial incentives in driving c-section overuse. The observed drop was only temporary and in about a year the use of c-sections went back to the initial level. We found a greater reduction in lower quality, more capacity-constrained hospitals. Moreover, the effect is driven by districts where the availability of Ob-Gyn specialists is higher and where women are predominant in the gender composition of Ob-Gyn specialists.

Do efficiency gains really translate into more budget for health? An assessment framework and country applications

Efficiency has historically been considered a key mechanism to increase the amount of available revenues to the health sector, enabling countries to expand services and benefits to progress towards universal health coverage (UHC). Country experience indicates, however, that efficiency gains do not automatically translate into greater budget for health, to additional revenues for the sector. This article proposes a framework to assess whether and how efficiency interventions are likely to increase budgetary space in health systems Based on a review of the literature and country experiences, we suggest three enabling conditions that must be met in order to transform efficiency gains into budgetary gains for health. First there must be well-defined efficiency interventions that target health system inputs, implemented over a medium-term time frame. Second, efficiency interventions must generate financial gains that are quantifiable either pre- or post-intervention. Third, public financial management systems must allow those gains to be kept within the health sector and repurposed towards priority health needs. When these conditions are not met, efficiency gains do not lead to more budgetary space for health. Rather, the gains may instead result in budget cuts that can be detrimental to health systems' outputs and ultimately disincentivize further attempts to improve efficiency in the sector. The framework, when applied, offers an opportunity for policymakers to reconcile efficiency and budget expansion goals in health.

Hospital reimbursement and capacity constraints: Evidence from orthopedic surgeries

Health care providers' response to payment incentives may have consequences for both fiscal spending and patient health. This paper studies the effects of a change in the payment scheme for hospitals in Norway. In 2010, payments for patients discharged on the day of admission were substantially decreased, while payments for stays lasting longer than one day were increased. This gave hospitals incentives to shift patients from one-day stays to two-day stays, or to decrease the admission of one-day stays. I study hospital responses using two separate difference-in-differences estimation strategies, exploiting, first, the difference in price changes across diagnoses, and secondly, the difference in bed capacity across hospitals. Focusing on orthopedic patients, I find no evidence that hospitals respond to price changes, and capacity constraints do not appear to explain this finding. Results imply that the current payment policy yields little scope for policymakers to affect the health care spending and treatment choices.

A Systematic Review of the Association Between Hospital Cost/price and the Quality of Care

BACKGROUND

Limited empirical evidence exists regarding the effect of price changes on hospital behavior and, ultimately, the quality of care. Additionally, an overview of the results of prior literature is lacking.

OBJECTIVE

This study aims to provide a synthesis of existing research concerning the relationship between hospital cost/price and the quality of care.

METHODS

Searches for literature related to the effect of hospital cost and price on the quality of care, including studies published between 1990 and March 2019, were carried out using four electronic databases. In total, 47 studies were identified, and the data were extracted and summarized in different tables to identify the patterns of the relationships between hospital costs/prices and the quality of care.

RESULTS

The study findings are highly heterogenous. The proportion of studies detecting a significant positive association between price/cost and the quality of care is higher when (a) price/reimbursement is used (instead of cost); (b) process measures are used (instead of outcome measures); (c) the focus is on acute myocardial infarction, congestive heart failure, and stroke patients (instead of patients with other clinical conditions or all patients); and (d) the methodological approach used to address confounding is more sophisticated.

CONCLUSION

Our results suggest that there is no general relationship between cost/price and the quality of care. However, the relationship seems to depend on the condition and specific resource utilization. Policy makers should be prudent with the measures used to reduce hospital costs to avoid endangering the quality of care, especially in resource-sensitive settings.

Do hospitals respond to changing incentive structures? Evidence from Medicare's 2007 DRG restructuring

In 2007, the Centers for Medicare and Medicaid restructured the diagnosis related group (DRG) system by expanding the number of categories within a DRG to account for complications present within certain conditions. This change allows for differential reimbursement depending on the severity of the case. We examine whether this change incentivized hospitals to upcode patients as sicker to increase their reimbursements. Using the National Inpatient Survey data from HCUP from 2005 to 2010 and three methods to detect the presence of upcoding, our most conservative estimate is an additional three percent of reimbursement is attributable to upcoding. We find evidence of upcoding in government, non-profit, and for-profit hospitals. We find spillover effects of upcoding impacting not only Medicare payers, but also private insurance companies as well.

Opening the black box of diagnosis-related groups (DRGs): unpacking the technical remuneration structure of the Dutch DRG system

While we know that upcoding of diagnosis-related groups (DRGs) regularly occurs, we have little knowledge of the role of the technical features of coding systems in inducing coding behaviour. This paper presents methods for investigating the financial structure of the Dutch DRG system, and more in particular the grouper software, to gain such insight. The paper describes a system for investigating the robustness of the reward structure, by simulating the response of the DRG system to small changes in individual coding. The results from these analyses are used to visualise some data on coding behaviour, and to investigate how this behaviour is affected by incentives in the technical features of the DRG system. A number of technical weaknesses in the system are also identified.

Do hospitals respond to decreasing prices by supplying more services?

Regulated prices are common in markets for medical care. We estimate the effect of changes in regulated reimbursement prices on volume of hospital care based on a reform of hospital financing in Germany. Uniquely, this reform changed the overall level of reimbursement-with increasing prices for some hospitals and decreasing prices for others-without directly affecting the relative prices for different groups of patients or types of treatment. Based on administrative data, we find that hospitals react to increasing prices by decreasing the service supply and to decreasing prices by increasing the service supply. Moreover, we find some evidence that volume changes for hospitals with different price changes are nonlinear. We interpret our findings as evidence for a negative income effect of prices on volume of care.

Paying for efficiency: Incentivising same-day discharges in the English NHS

We study a pay-for-efficiency scheme that encourages hospitals to admit and discharge patients on the same calendar day when clinically appropriate. Since 2010, hospitals in the English NHS are incentivised by a higher price for patients treated as same-day discharge than for overnight stays, despite the former being less costly. We analyse administrative data for patients treated during 2006-2014 for 191 conditions for which same-day discharge is clinically appropriate - of which 32 are incentivised. Using difference-in-difference and synthetic control methods, we find that the policy had generally a positive impact with a statistically significant effect in 14 out of the 32 conditions. The median elasticity is 0.24 for planned and 0.01 for emergency conditions. Condition-specific design features explain some, but not all, of the differential responses.

Dishonesty in health care practice: A behavioral experiment on upcoding in neonatology

Dishonest behavior significantly increases the cost of medical care provision. Upcoding of patients is a common form of fraud to attract higher reimbursements. Imposing audit mechanisms including fines to curtail upcoding is widely discussed among health care policy-makers. How audits and fines affect individual health care providers' behavior is empirically not well understood. To provide new evidence on fraudulent behavior in health care, we analyze the effect of a random audit including fines on individuals' honesty by means of a novel controlled behavioral experiment framed in a neonatal care context. Prevalent dishonest behavior declines significantly when audits and fines are introduced. The effect is driven by a reduction in upcoding when being detectable. Yet upcoding increases when not being detectable as fraudulent. We find evidence that individual characteristics (gender, medical background, and integrity) are related to dishonest behavior. Policy implications are discussed.

Hospital responses to price shocks under the prospective payment system

Under the prospective payment system (PPS), hospitals receive a bundled payment for an entire episode of treatment based on diagnosis-related groups (DRG). Although there is ample evidence regarding the impact of the introduction of the PPS, there is little research on the effects of the ensuing changes in payment levels under the PPS. In 2005, the Medicare PPS changed its definition of payment areas from the Metropolitan Statistical Areas to the Core-Based Statistical Areas, generating substantial area-specific price shocks. Using these exogenous price variations, this study examines hospital responses to price changes under the PPS. The results demonstrate that, while the average payment amount significantly increases in the affected areas, no parallel trend is observed in admission volume, treatment intensity, and quality of services. Conversely, hospitals facing a price increase are more liable to the perverse incentives that the PPS is known to encourage, namely, selecting or shifting patients into higher-paying DRGs. These results suggest that paying a higher price for a given service may not induce hospitals to offer services of better quality, but can rather prompt even higher payments through other behavioral responses.

Limited Consequences of a Transition From Activity-Based Financing to Budgeting: Four Reasons Why According to Swedish Hospital Managers

Activity-based financing (ABF) and global budgeting are two common reimbursement models in hospital care that embody different incentives for cost containment and quality. The purpose of this study was to explore and describe perceptions from the provider perspective about how and why replacing variable ABF by global budgets affects daily operations and provided services. The study setting is a large Swedish county council that went from traditional budgeting to an ABF system and then back again in the period 2005-2012. Based on semistructured interviews with midlevel managers and analysis of administrative data, we conclude that the transition back from ABF to budgeting has had limited consequences and suggest 4 reasons why: (1) Midlevel managers dampen effects of changes in the external control; (2) the actual design of the different reimbursement models differed from the textbook design; (3) the purchasing body's use of other management controls did not change; (4) incentives bypassing the purchasing body's controls dampened the consequences. The study highlights the challenges associated with improvement strategies that rely exclusively on budget system changes within traditional tax-funded and politically managed health care systems.

Technocratic recentralization in the French health care system: A critical evaluation

The French health care system implemented several corporate management recipes such as diagnostic-related groups (DRGs), benchmarking, and activity-based management in a bid to restore fiscal discipline and to "reassert the center." The government also regrouped health policy decisions with the Regional Health Agencies and opted for a top-down line of command to ensure policy implementation. Though reforms emphasized evidenced-based policy and outputs measurement, outcomes were below expectations in many areas and led to a shift in values. Professional autonomy and patient engagement receded. This leads us to a critical evaluation of the French audit society.

Is it good to be too light? Birth weight thresholds in hospital reimbursement systems

Birth weight manipulation has been documented in per-case hospital reimbursement systems, in which hospitals receive more money for otherwise equal newborns with birth weight just below compared to just above specific birth weight thresholds. As hospitals receive more money for cases with weight below the thresholds, having a (reported) weight below a threshold could benefit the newborn. Also, these reimbursement thresholds overlap with diagnostic thresholds that have been shown to affect the quantity and quality of care that newborns receive. Based on the universe of hospital births in Germany from the years 2005-2011, we investigate whether weight below reimbursement relevant thresholds triggers different quantity and quality of care. We find that this is not the case, suggesting that hospitals' financial incentives with respect to birth weight do not directly impact the care that newborns receive.

Plan responses to diagnosis-based payment: Evidence from Germany's morbidity-based risk adjustment

Many competitive health insurance markets adjust payments to participating health plans according to their enrollees' risk - including based on diagnostic information. We investigate responses of German health plans to the introduction of morbidity-based risk adjustment in the Statutory Health Insurance in 2009, which triggers payments based on "validated" diagnoses by providers. Using the regulator's data from office-based physicians, we estimate a difference-in-difference analysis of the change in the share and number of validated diagnoses for ICD codes that are inside or outside the risk adjustment but are otherwise similar. We find a differential increase in the share of validated diagnoses of 2.6 and 3.6 percentage points (3-4%) between 2008 and 2013. This increase appears to originate from both a shift from not-validated toward validated diagnoses and an increase in the number of such diagnoses. Overall, our results indicate that plans were successful in influencing physicians' coding practices in a way that could lead to higher payments.

Price Changes in Regulated Healthcare Markets: Do Public Hospitals Respond and How?

This paper examines the behaviour of public hospitals in response to the average payment incentives created by price changes for patients classified in different diagnosis-related groups (DRGs). Using panel data on public hospitals located within the Italian region of Emilia-Romagna, we test whether a 1-year increase in DRG prices induced public hospitals to increase their volume of activity and whether a potential response is associated with changes in waiting times and/or length of stay. We find that public hospitals reacted to the policy change by increasing the number of patients with surgical treatments. This effect was smaller in the 2 years after the policy change than in later years, and for providers with a lower excess capacity in the pre-policy period, whereas it did not vary significantly across hospitals according to their degree of financial and administrative autonomy. For patients with medical DRGs, instead, there appeared to be no effect on inpatient volumes. Our estimates also suggest that an increase in DRG prices had no impact on the proportion of patients waiting more than 6 months. Finally, we find no evidence of a significant effect on patients' average length of stay. Copyright © 2016 John Wiley & Sons, Ltd.

Do public hospitals respond to changes in DRG price regulation? The case of birth deliveries in the Italian NHS

We study how changes in Diagnosis-Related Group price regulation affect hospital behaviour in quasi-markets with exclusive provision by public hospitals. Exploiting a quasi-natural experiment, we use a difference-in-differences approach to test whether public hospitals respond to an exogenous change in Diagnosis-Related Group tariffs by increasing C-section rates and/or by upcoding. Controlling for a detailed set of mother characteristics, we find that price changes did not affect the probability of a C-section. We do however find evidence of upcoding: Conditional on the birth delivery method (either a C-section or a vaginal delivery), public hospitals experiencing the largest price change exhibit a higher probability of treating patients coded as complicated. This finding suggests that even public hospitals may be sensitive to market incentives.

Economic incentives and diagnostic coding in a public health care system

We analysed the association between economic incentives and diagnostic coding practice in the Norwegian public health care system. Data included 3,180,578 hospital discharges in Norway covering the period 1999-2008. For reimbursement purposes, all discharges are grouped in diagnosis-related groups (DRGs). We examined pairs of DRGs where the addition of one or more specific diagnoses places the patient in a complicated rather than an uncomplicated group, yielding higher reimbursement. The economic incentive was measured as the potential gain in income by coding a patient as complicated, and we analysed the association between this gain and the share of complicated discharges within the DRG pairs. Using multilevel linear regression modelling, we estimated both differences between hospitals for each DRG pair and changes within hospitals for each DRG pair over time. Over the whole period, a one-DRG-point difference in price was associated with an increased share of complicated discharges of 14.2 (95 % confidence interval [CI] 11.2-17.2) percentage points. However, a one-DRG-point change in prices between years was only associated with a 0.4 (95 % CI [Formula: see text] to 1.8) percentage point change of discharges into the most complicated diagnostic category. Although there was a strong increase in complicated discharges over time, this was not as closely related to price changes as expected.